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Public Infrastructures, Production Organizations, and Economic Development

  • Kohei Daido

    ()

    (School of Economics, Kwansei Gakuin University)

  • Ken Tabata

    ()

    (School of Economics, Kwansei Gakuin University)

We develop a political economy model of growth to examine economic development led by the interactions between an economic decision concerning a firm’s production technology (CRS vs IRS technology) and a political decision concerning public infrastructures. We show that multiple equilibrium growth paths occur due to differences in expectations regarding the quality of public infrastructures. These multiple paths illustrate why economies with poor initial conditions can catch up to and, furthermore, overtake economies with better initial conditions. Our result could explain the experiences of some East Asian countries where co-evolutions of public infrastructures and industrial transformations spurred economic development.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp93.pdf
File Function: First version, 2012
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Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 93.

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Length: 35 pages
Date of creation: Aug 2012
Date of revision: Aug 2012
Handle: RePEc:kgu:wpaper:93
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